A Somerset man, Nick, protests outside Downing Street over delays to universal credit payments which have left him homeless twice.
Photograph: Steve Parkins/REX/Shutterstock

MPs have told the government to “wake up to reality” after it rejected criticism of universal credit by the public spending watchdog and insisted its faltering welfare reform was a “great British innovation”.

It painted a damning picture of an unwieldy, inefficient and unresponsive system that was unable to demonstrate value for money, despite £1.3bn of investment in digital technology over eight years, and was unlikely ever to do so.

McVey, however, suggested the NAO report was unreliable because it had not taken into account the impact of recent changes to universal credit. The government’s own analysis showed the scheme was working, she said.

The NAO defended its report, and noted that the Department for Work and Pensions (DWP) had signed it off, which is normally an acknowledgement that it agrees with its factual content.

Amyas Morse, the head of the NAO, said: “This report was agreed by the department so we are surprised by the minister’s remarks. We stand by the facts in our report.”

McVey said the report did not acknowledge the DWP had delivered recent improvements in areas such as administration costs and payment timeliness. A DWP survey of claimants showed 83% were “happy with the system”, she said.

“Our analysis shows that universal credit is working; we already know it helps more people into work – and stay in work – than the legacy system.”

Universal credit was “a unique example of great British innovation” based on “leading edge technology”, she said, and countries such as New Zealand, Spain, France and Canada had come to “watch and learn” about the system.

However, the NAO report appears to acknowledge the specific changes to universal credit policy cited by McVey, and notes that it received management data from the DWP as recently as May 2018. In some cases, the report concludes, it was too early to assess the impact of the most recent changes.

The report notes that the DWP struggled to provide NAO staff with some of the information they requested “in a timely manner”, and failed to provide access to a survey of claimants’ experiences, which showed problems with payment timeliness.

McVey insisted government claims that universal credit would help 200,000 people into work were robust, and had been signed off by the Treasury. The NAO report says this claim is unmeasurable, and that the DWP had accepted it could not prove it.

Her Commons statement was met with incredulity by opposition MPs who cited widespread examples of vulnerable claimants being plunged into debt and rent arrears and left reliant on food banks, as a result of avoidable universal credit delays and errors.

The shadow work and pensions secretary, Margaret Greenwood, said the government needed to “wake up to reality” over the reform. “It [government] must stop the roll out of universal credit and fix the flaws before more people are pushed into poverty by a benefit meant to protect them from it.”

She added: “It is disgraceful that the government tried to rubbish the NAO report this morning and is still refusing to listen to those families who have been badly let down by their failed universal credit system.”

McVey was supported in the chamber by Iain Duncan Smith, who oversaw the design and implementation of universal credit while in her role from 2010-16. He described the NAO report as a “shoddy piece of work”.

Frank Field, the chair of the Commons work and pensions committee, said: “Rather than that banal offering, which did nothing for our poorest constituents, a more realistic statement from the secretary of state would have acknowledged that universal credit is helping to transform the welfare state from one which protects people from poverty, to one that drives them into destitution.”

The NAO scrutinises public spending for parliament and is independent of the government.